There's been only one story in Germany this week: Chancellor Gerhard Schroeder's holiday plans.

But while some dismiss it as "summer theatre", the affair surrounding Mr Schroeder's decision to cancel his vacation in Italy after a junior Italian minister insulted German tourists shows once again his sharp political instinct.

Schroeder may have rediscovered his popular touch

Opinion polls show 66% of Germans back him. Crucially, he has also won over Bild, this country's best-selling newspaper, which greeted the news with the headline: "Basta! Chancellor blows the whistle on Italy."

Other senior figures in his Social Democratic Party (SPD) have followed suit, also cancelling their holidays in Italy.

"Gut-feeling and Bild are often Mr Schroeder's most effective foreign policy advisors,"' wrote Sueddeutsche Zeitung this week.

"The Chancellor's initial reaction: that he would consider not going to Italy, was a self-initiated political instrumentation of his private life."

It might well be there's now a little bit of sympathy again

Ulrike GuerotGerman Council of Foreign Relations

One newspaper has even accused him of using the issue as he did last year's floods, as a life-line to restore tarnished popularity.

Since winning re-election last year, Mr Schroeder has been on the defensive.

The economy is on the brink of recession, more than 4.5 million people are unemployed, and the government has seemed rudderless.

His plans for reforms met with strong opposition within his party, and there was also conflict with the unions.

This row is not decisive. The most decisive thing is the economy

Professor Hajo FunkeBerlin's Free University

"The strikes and the state of the economy were very damaging for the government.

"It might well be there's now a little bit of sympathy again," says Ulrike Guerot from the German Council of Foreign Relations.

"But it can disappear in the next two or three weeks, with unemployment still high and reforms unresolved," she adds.